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MUMBAI: Larsen & Toubro expects its energy-related construction and engineering business, which has been a drag on earnings, to turn around in the next 18 months even if crude oil prices remain muted, a top official said.

“Some recovery is already happening in the business and we are optimistic that there will be an upturn in 18 months,” said Subramanian Sarma, chief executive officer of L&T Hydrocarbon Engineering.

“Despite the softness in crude prices, we are well placed in the industry with our cost-competitive base.” L&T hived off its hydrocarbon business into a subsidiary about two years ago to tap opportunities in the sector, coinciding with the period when crude oil prices had their steepest fall, dropping close to $30 a barrel. The unit is completing old engineering and construction orders in the oil and gas sector at low margins.

“We are in the final stages of executing the old projects that have hurt our profitability. We will finish them in 2016 and the drag will be over.” L&T Hydrocarbon Engineering is currently bidding for projects worth $2-3 billion and is counting on Indian PSU energy firms for orders given that most global oil companies have cut their expenditure. In the international market, it is focussing on orders with a $500 million ticket size.

“My view is that the volatility around crude prices will stabilise by mid-2016 and companies will again look at investing,” Sarma said. Credit Suisse upgraded L&T shares to ‘outperform’ from ‘neutral’ in a report on Monday.